Net Gains

By Leslie Hansen Harps

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Here's a look at how several companies have successfully tapped the Internet and the web to improve their logistics and supply chain operations.

"The web is the next evolution in technology," says Richard J. Sherman, president, Gold & Domas Research, Austin, Texas. "The name of the game in logistics is reducing latency in the supply chain. The Internet provides seamless, low-cost communications—virtually in real time—from any point to any point at any time.

"Web-based technologies today are where PC-based technologies were five years ago," he says. "It's only a matter of time and cost before all companies are able to upgrade their work stations, user access and telecommunications to fully implement web-based applications."

The combination of the Internet plus web-based applications "offers significant productivity and communication gains," which reduces the time to move product and information, he explains. Sherman suggests thinking of the Internet "as the communications infrastructure—the plumbing—and the web as the human interface to the information coming from the Internet."

Much of the time, data can be transmitted via the Internet, application to application, with no interaction. "If humans do need to see the data, they'll go to the web via a browser—a user interface or window into the data that's being carried over the Internet," Sherman explains.

While some technologies are still web-based, a growing number are web-native—designed from the ground up using web architecture. Web-native applications are designed so that information is available to users "anywhere, any time, via the web," Sherman says, without any restriction on type of device, whether Blackberry, work station, or PDA.

"Web-based technology, on the other hand, provides the capability to create a graphic user interface (GUI) on top of an application that hasn't been designed specifically for Internet deployment," Sherman says. "Instead of using a traditional screen-based display, web-based technology uses an HTML or web-based screen."

In addition to offering robust functionality through web architecture, the web provides alternatives to the traditional method of deploying software: buying a software application and installing it on a mainframe or in a client/server configuration.

With the hosted model, all users run off one copy of the software, notes Peter Stiles, vice president of strategy and business development, LeanLogistics Inc., Holland, Mich., which offers a hosted, web-native transportation management system.

This model "substantially reduces risk and time to benefit," he says. "A user simply has to develop an interface. All the compatibility issues are eliminated."

In those situations where a vendor offers only a hosted model, Stiles says, the vendor maintains a single version of the software, which may reduce maintenance costs and free the vendor to focus on developing new functionality rather than maintaining multiple versions of the application.

Trading partners implement only once for all their relationships, not once for each partner they deal with. This actualizes the "Network Effect"—the service becomes more valuable as more people use it.

For example, Pepsi Americas places its loads on the LeanLogistics' Private Transportation Marketplace to obtain coverage by giving all its core carriers visibility into additional load availability. By pushing these loads into the market, Pepsi Americas is, in effect, marketing requirements to carriers needing to fill capacity.

A second hosting model is where a software user serves as the hosting entity, providing access to multiple parties via a private network.

For example, a large retailer that implements a web-based transportation management solution behind its firewall may opt to give its vendors access to that functionality. This enables smaller manufacturers to have the benefits of Transportation Management System (TMS) functionality without having to invest in their own.

Application Service Provider (ASP). With this model, a vendor "takes a copy of the software and runs it on a network for you," Stiles explains. "The vendor hosts a copy of the software, but there is a copy of the software for each customer."

With the ASP model, "users have exclusive use of an application hosted by an application provider, and they can tailor the application to meet their unique needs. They don't need an in-house staff to manage it and don't necessarily need to have servers in their facility," Sherman says.

Software vendors increasingly offer customers a variety of deployment options, Gonzalez notes. They offer pricing options as well, enabling customers to choose from a traditional upfront arrangement for license, service and maintenance or paying on a subscription or per-transaction basis.

"Part of the decision-making is whether a company wants to invest in and support the infrastructure, or have someone else do it and pay as they use it," says Mark Michener, global manager, transportation systems for consumer goods manufacturer/marketer Newell Rubbermaid Inc., Freeport, Ill.

When implementing a TMS, "Newell Rubbermaid took the approach that it was cheaper in the long run to invest in the hardware and software and host it ourselves," he says.

Other companies opt for a different route, as evidenced by a recent finding that nearly 30 percent of TMS deployments in 2002 were hosted, ARC's Gonzalez reports.

With all the benefits of the Internet and the web, it's important to remember that technological tools are just that: tools. When implementing a new system, "don't focus on the technology, focus on the business process you want to enable," Gonzalez advises.

Suppose you're a retailer that wants to take greater control of your inbound operation and convert from prepaid to collect transportation.

"Map out the process as it is today, and where you want to be one or two years from now," Gonzalez suggests. "Then look at the technology providers who can support the process you want to get to from a functionality and architecture standpoint."

Once you've identified the solution that best meets your needs, evaluate the various deployment and pricing models and pick the one that's best for you.

Here's a look at how several companies have successfully tapped the Internet and the web to improve their logistics and supply chain operations.

Plastipak: Ordering Office Supplies Online

Plastipak Packaging Inc., Plymouth, Mich., provides a wide range of plastic packaging for consumer products companies. The company maintains plants in the United States, Eastern Europe and South America. Purchasing responsibility for office supplies varies at each location.

In October 2002, Plastipak sought an office supplies vendor with robust web-based tools. Requirements for the solution included user-friendliness and powerful reporting capabilities. After evaluating a handful of companies, Plastipak selected Staples Contract, a division of Staples Inc., which offered an extensive business-to-business Internet ordering solution.

"Training was quick and easy," says Mitch Lowery, Plastipak's procurement manager. Local Staples people were available for face-to-face training, while some training was conducted over the phone.

Plastipak customized an online catalog of products from which its buyers could select. "We were able to point users toward what we wanted them to buy," Lowery says. This dramatically reduced rogue buying. In addition, because purchasers were able to get "the store experience without having to go to the store," shopping trips to the local office supplies retailer were cut significantly.

Before moving to a single vendor, office supplies were purchased from many different suppliers with varying degrees of reporting capabilities. So it was difficult for Lowery to get the complete picture. Today, he uses online reports to "see where our expenditures are by category, manufacturer, or a given item or group of items. This enables us to do analysis, and get our arms around our total spend of office supplies," he says.

After more than a year's experience with the online ordering system, Plastipak and Staples recently renegotiated their agreement. "The amount and relatively low value of transactions were costing the partnership money," Lowery notes.

So Plastipak is identifying ways to reduce the number and increase the value of transactions, including centralizing the procurement of office supplies at corporate headquarters.

Lowery is pleased with the results of using web-based tools. "We moved from the Dark Ages to the Electronic Age overnight," he says.

Dynamic Marketing: Reducing Costs, Improving Service

Dynamic Marketing Inc. illustrates how web-based technology can help smaller companies compete with the giants. A buying co-op based in Brooklyn, N.Y., Dynamic Marketing has owner members in New York, Connecticut and Pennsylvania who buy direct from appliance manufacturers. Their competition: Sears, Best Buy, and the big box retailers.

"As a co-op, our survival depends on keeping costs as low as possible for members," observes Jorge Joskowicz, controller of Dynamic Marketing. "If we can't stay within a certain percentage of the total cost of the product, we're not competitive." To keep costs down, the co-op needs to continually improve and streamline its processes.

Two years ago, the co-op sought an integrated solution, a web-based system that would enable them to handle inventory control, transaction processing, accounts receivable, returns authorization, product information, and interactions with their members online.

They implemented the purchase order, inventory control, and warehouse components of the Lawson Purchasing suite, and the accounts receivable and general ledger from the Lawson Financials suite.

The new solution has given Dynamic Marketing much more information online and enabled it to significantly reduce paper and streamline processes. "We stopped printing invoices, which eliminated tremendous time and dollar cost," Joskowicz says. The co-op sends a monthly statement instead of hundreds of invoices each month.

Best of all, the web-based technology has become a powerful sales tool. A retail member can download the available inventory in a Palm Pilot. When customers come into the store, the salesperson can check a Palm Pilot and immediately confirm product availability. "The big boxes don't have that yet, they still have to go to the terminal to check availability," Joskowicz notes. "Our customers are impressed."

Newell Rubbermaid: Enabling a Global Transportation Initiative

Flexibility and scalability were top priorities for Newell Rubbermaid Inc. two years ago, when the company sought a solution that would enable a major global transportation initiative.

"As our business expanded, we saw the need for a global application," says Michener. "Web capability was an important part of our selection."

Newell Rubbermaid knew it wanted a transportation management system "that would enable us to do more complex planning scenarios to drive productivity," Michener says.

The company's divisions used a wide range of transportation systems, ranging from manual processes to functionality within the order management or warehouse management system. Only one division had an actual transportation management system.

As part of its preparation for a new TMS, Newell Rubbermaid began centralizing its transportation management functions. Part of this initiative included implementing a core carrier program for LTL, truckload and ocean transportation "so that we could get to a smaller number of providers to manage in the transportation management system, rather than taking our existing carrier base and installing a TMS," Michener explains.

The consumer products manufacturer/marketer formed a team to select and implement the new system. A transportation steering committee with representatives from the business units looked at functionality, while the corporate IS department looked at technological aspects of the new system.

The company sought a solution that could execute processes through the web. "While web-enabling client/server technology provides good information visibility, it's more difficult to kick off processes from a planning aspect," Michener says. So the team looked for a web-native solution and, in the fall of 2002, chose G-Log's Global Command and Control Center (GC3) software.

The planning module of the new TMS was implemented first in the Rubbermaid Commercial Products facility in Winchester, Va., then in three other locations. Another three sites are scheduled for implementation during the next few months. The TMS will eventually be rolled out to 20 more domestic sites, then to international locations.

Results are good, Michener says, with two- to five-percent reduction in transportation costs expected during the initial implementation, and a similar amount during phase two.

He cites several benefits of web-based technology, including the ability to upgrade just the technology in the hosted environment rather than having to update the application on each client in a client/server environment.

In addition, "the implementation time and tasks that our divisions had to go through as part of the implementation was minimal," Michener says. "Using a hosted environment with a centralized application enables doing it once instead of many times."

PM Global Foods: Leveling the Playing Field

The Internet and the web, together with web-based applications, level the playing field for small and medium-sized businesses. In addition, the Internet gives "small and medium companies access to more robust, richer systems," notes Pete Stiles.

The web "has freed us to be a nimble logistics operation that is able to respond quickly and be proactive as opposed to reactive," says Michael F. Hampel, logistics manager for PM Global Foods. "More importantly, it has enabled us to be informed and to function like a big company."

In Hampel's eyes, "the most impressive, useful product for a logistics operations person is the web. I'll use any tool I can find on the web." Hampel knew when he arrived at PM Holdings that the company needed a transportation management system. "We did everything with our hands and fingers, and phone and fax were the major communications methods. It was cumbersome and restrictive," Hampel recalls.

After researching various tools, he selected GT Nexus' GTN web portal, a transaction system for ocean transportation, as the company's global trading tool. The portal provides a common transaction platform for ocean shipping, and enables PM Global Foods to automate and standardize business activities such as scheduling and booking ocean transportation, preparing and submitting shipment documents, and tracking cargo globally.

"My company wants the ROI without the investment," Hampel says. With web-based tools, "I can save money without the investment by using the Internet and e-mail." Now, instead of spending hours on the phone, PM Global Foods personnel can input information and instantly get a response, whether they're seeking the name of a vessel, arrival date, or what container numbers were shipped the previous week.

As a result, "I can immediately send that document to my customer and start the clock ticking, cutting four to five days out of a 30-day cycle," he says. Being able to invoice customers more quickly enables the company to cut its order-to-cash cycle significantly.

Use of the GTN portal has enabled PM Global Foods to reduce head count, improve efficiency by 30 to 40 percent, and improve the bottom line. In addition, the company has brought its freight forwarding in-house. "We're happier," Hampel says. "We're in control of our own freight."

Four Seasons: Learning the ABCs of ASP

"We needed a transportation management system, especially for inbound," says Ben Carbo, logistics manager for Four Seasons, a division of Standard Motor Products Inc., Lewisville, Texas. "We service thousands of customers throughout the United States who we ship to, and who return product to us."

Returns account for a big part of Four Seasons' transportation, with customers making core, warranty, and overstock returns. Carbo put out routing guides for customers to use, but, with national contracts with various LTL carriers expiring at different times of the year, these were soon out of date.

"Customers using obsolete routing guides or using carriers with which we did not have pricing agreements resulted in extra freight expense each year," Carbo explains. So the company began looking for an alternative.

However, "our freight dollars weren't enough to justify the cost of buying a licensed TMS robust enough to handle all our needs," he says. So Four Seasons explored the application service provider (ASP) model. First it conducted a pilot project with one TMS that had strong inbound capabilities but was not a good match on the outbound side.

Four Seasons went live with the inbound portion of the TMS in June 2003. Today, "all our inbound vendor shipments and customer returns go through a vendor portal," Carbo says. While the company is still working out the kinks with the outbound transportation component (which went live in November), Carbo expects solid results soon.

"The ASP model lets medium-sized companies get in a TMS and prove its value and payback," Carbo says. "It allows you to prove the concept with minimum risk." Success with an ASP can lay the groundwork for expanding the TMS, he notes. "This way, you get a real feel for what works for you. If one doesn't work out as expected, you can try another one before you put out the capital for a licensed copy."

The Future

Radio frequency identification technologies "are a great way to capture information," Rich Sherman says. "Web-based applications provide the ability to communicate and use that information. If we capture information in real time, we need applications that can interpret the data and create decision support information in real time." Sherman sees a future where such technology provides the capability to manage the supply chain at the event level.

In addition, Sherman predicts that the future will see "more dynamic than model-based optimization, which will bring logistics/supply chain planning tools within reach of smaller companies." Sherman also sees a convergence between supply chain planning and execution.

While they're not here yet, Sherman anticipates that enterprise-wide execution-level applications soon will enable seamless integration from inbound logistics through manufacturing to outbound and across the supply network.

Also look for the convergence of web and cellular technology to have an impact on logistics and supply chain management. "Using mobile technology, many applications enable very real-time visibility of products outside the four walls of the physical warehouse," notes Dan Mahoney, Irista Inc.'s director of business development for WMS solutions.

For example, store and forward transaction technology can enable a warehouse management system to forward information to a Palm Pilot, which can store the information until it's used, then communicate it back to the WMS. This capability "will extend visibility into the field without the cost of setting up a temporary LAN," Mahoney says.

Selecting Successful Systems

While there are unique aspects to successfully selecting and implementing web-based technology, many of the lessons learned hold true for virtually any systems implementation.

These include:

Do your homework. "Don't rush into anything until you make sure it works," advises Ben Carbo, logistics manager, Four Seasons, a division of Standard Motor Products Inc., Lewisville, Texas. "We did some testing before we went with the Shippers Commonwealth solution. We asked them to show how their solution worked with our data in real time."

Make sure your data is clean—or allow time to get it that way. Whether you're operating in a web or client/server environment, don't underestimate the effort required to clean your data, Carbo recommends.

Watch the bandwidth. "A web-enabled product needs a good network platform," notes Mark Michener, global manager, transportation systems, Newell Rubbermaid Inc., Freeport, Ill. "People quickly get used to clicking a button and getting an immediate response. They have become used to extremely fast response times." To enhance performance, Newell Rubbermaid is upgrading the infrastructure at some of its shipping locations.

Be patient. "Always give yourself more time to implement—it will take longer than expected," says Jorge Joskowicz, controller of Dynamic Marketing. "Always budget a little extra for incidentals, be prepared to have a few headaches, and plan for overtime."

Don't overlook the people aspects. "Whenever you take a manual process and enable it with technology, you will go through a learning curve," says Michener.

Joskowicz agrees. "People resist change," he says. Despite the fact that Dynamic Marketing provided its co-op members with training for several weeks before go-live, go-live itself was a challenge. "Everybody was confused. But, a month later, dealers told us it was getting a lot better," as they became more familiar with the system and moved along the learning curve.

"It was painful, but we got through it to the other side, and now see the benefits," Joskowicz says.